Study links reputational scandals to greater use of accounting practices that improve results
An analysis of 488 large European companies between 2018 and 2022 found that the more negative news they receive on environmental, social and governance issues, the greater their use of accounting practices that improve financial results, known as earnings management. These range from changing the timing of operations to reclassifying items. The text notes they do not necessarily imply fraud and that solid corporate governance reduces their use.
In 40 seconds
- The study analyzed 488 large European companies between 2018 and 2022, cross-referencing their financial decisions with environmental, social and governance news.
- The more negative news, the greater the use of accounting practices that improve results, without this necessarily implying fraud.
- The practices include bringing forward sales, delaying investments or expenses, and reclassifying items so the core business appears more profitable.
Read the full story at The Conversation
IASummary generated by artificial intelligence from a story by The Conversation. It may contain errors: the original source prevails.
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